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Statement of Investment
Policies and Procedures
University of Waterloo Pension
Plan (2011)
Registration number: 0310565
Effective November 1, 2020
Replaces previous version which was last revised and effective on November 1, 2018
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Contents
Section 1— Overview 1
1.01 Purpose of Statement 1
1.02 Standard of Care 1
1.03 Objective of the Plan 1
1.04 Administration 1
1.05 Background of the Plan 1
Section 2 — Asset Mix and Diversification Policy 3
2.01 Risk/Return Considerations 3
2.02 Investment and Risk Philosophy 3
2.03 Portfolio Return Expectations 4
2.04 Expected Volatility 4
2.05 Asset Mix 4
2.06 Management Structure 5
Section 3 — Permitted and Prohibited Investments 6
3.01 General Guidelines 6
3.02 Permitted Investments 6
3.03 Minimum Quality Requirements 7
3.04 Maximum Quantity Restrictions 7
3.05 Environmental, Social and Governance Factors 8
3.06 Prior Notice Required 8
3.07 Securities and Cash Lending 9
3.08 Short Selling 9
3.09 Liquidity 9
3.10 Borrowing 9
Section 4 — Monitoring and Control 10
4.01 Delegation of Responsibility 10
4.02 Performance Measurement 12
4.03 Compliance Reporting by Investment Manager 13
4.04 Audit 13
Section 5 — Administration 14
5.01 Conflicts of Interest 14
5.02 Monitoring of Asset Mix 14
5.03 Selecting Fund Managers 14
5.04 Monitoring Manager Performance 15
5.05 Dismissal of an Investment Manager 15
5.06 Voting Rights 15
5.07 Valuation of Investments Not Regularly Traded 15
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Section 6 — General Provisions 16
6.01 Related Party Transactions 16
6.02 Policy Review 17
Appendix A — Investment Manager Compliance Letter 18
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Section 1— Overview
1.01 Purpose of Statement
This Statement of Investment Policies and Procedures (the “Policy”) provides the framework for the
investment of the assets for the University of Waterloo Pension Plan (2011), registration number
0310565 (the “Plan”). The University of Waterloo (“UW”) is the sponsor and legal administrator of
the Plan.
This Policy is based on the “prudent person approach” to ensure the prudent investment and
administration of the assets of the Plan. The Plan will be managed in accordance with the
parameters set out in the Income Tax Act (Canada) (“ITA”) and the Pension Benefits Act (Ontario)
(“PBA”), including their respective Regulations and all subsequent amendments, and any other
applicable federal or provincial legislation and regulations governing the investment of pension
funds, including Schedule III to the Pension Benefits Standards Regulation, 1985 (Canada)
(“PBSA”).
This Policy also seeks to establish ongoing communication between UW and others engaged in the
administration of the Plan. It is intended to summarize and explain the investment beliefs but does
not supersede the formal plan documents or the applicable provisions of the Acts governing the
Plan. In case of any dispute between this document and the formal Plan documents, the formal
Plan documents shall prevail.
1.02 Standard of Care
This Policy is based on the “prudent person approach” to ensure the prudent investment and
administration of the assets of the Plan within the parameters set out in the PBA and the
Regulations thereunder. UW shall exercise the care, diligence and skill in the administration and
investment of the Plan that a person of ordinary prudence would exercise in dealing with the
property of another person. Such persons must further use all knowledge and skill that they
possess or ought to possess.
1.03 Objective of the Plan
The objective of the Plan is to provide members of the Plan with the retirement benefits prescribed
under the terms thereof.
1.04 Administration
UW is the sponsor and legal administrator of the Plan and is therefore responsible for all matters
relating to the administration, interpretation and application of the Plan.
1.05 Background of the Plan
The Plan is a contributory defined benefit plan, based upon an individual’s final average salary and
years of participation in the Plan prior to retirement.
Most pensions paid under the Plan are escalated annually by the cost-of-living factor described in
the Plan. For benefits accrued prior to January 1, 2014, liabilities will grow in direct relation to the
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increase in the Consumer Price Index (“CPI”). For benefits accrued on or after January 1, 2014,
liabilities will increase by 75% of the increase in CPI. A protocol has been developed to set out the
parameters under which the Pension and Benefits Committee (“P&B Committee”), which has been
set up by the Board to assist with the management of the pension plan, would increase the level of
indexation beyond 75%. Notwithstanding the foregoing, if the increase in CPI in a given year
exceeds 5%, then the indexation paid in that year will be determined by the P&B Committee, in its
discretion, taking into account the Plan’s ability to afford such an increase.
Thus, to provide pensions at a reasonable cost, it is necessary to strive for sufficient/appropriate
real investment returns on the Plan assets over medium- and long-term periods. The investment
philosophy, policies and procedures adopted in this document will assist in the achievement of this
goal in a prudent and effective manner.
This Policy has been developed taking into account factors such as:
a) The nature of the Plan’s liabilities;
b) The allocation of such liabilities between active and retired members;
c) The funded and solvency positions of the Plan;
d) The net cash flow position of the Plan;
e) The investment horizon of the Plan;
f) Historical and expected capital market returns; and
g) The benefits of investment diversification.
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Section 2 — Asset Mix and Diversification Policy
2.01 Risk/Return Considerations
Investment objectives for the Plan have been established (a minimum return of CPI +3.6% net of
expenses) with regard to the:
a) Structure and design of, and benefits provided by, the Plan;
b) Rate of return which would provide appropriate appreciation on the assets in the Plan;
c) Financial position of the Plan, as provided by actuarial valuations and projections;
d) The risk tolerance which is acceptable to UW in the Plan;
e) Demographics of the Plan membership; and
f) Special factors, if any, which UW considers significant.
2.02 Investment and Risk Philosophy
UW recognizes that, based on historical data, the asset classes most likely to produce the greatest
return over time are also likely to exhibit the most volatility. Conversely, the asset classes likely to
be the least volatile are likely to produce the lowest returns over time. Therefore, the investment
philosophies and strategies must take into account both return and risk objectives.
a) Investment Philosophy
The investment management structure employs a mix of active and passive management
styles. Active management has been adopted for portions of the assets as it provides the
opportunity to outperform common market indices over the long-term, while controlling
active risk levels. Passive management has been adopted for portions of the assets as it
minimizes the risk of underperformance relative to a benchmark index and is generally less
expensive than active management. For information on how environmental, social and
governance factors are considered in selecting investment managers, refer to Section 3.05.
Active equity fund managers are to apply the long-term value approach by investing in
companies at prices below their underlying long-term values to protect capital from loss and
earn income over time. The fund managers will attempt to identify financially-sound
companies with good potential profitability which are selling at a discount to their intrinsic
value. Appropriate measures of low prices may consist of: low price-earnings, high dividend
yields, significant discounts to book value and low price to free cash flow. Downside
protection is obtained by seeking a margin of safety in terms of sound financial position and
a low price in relation to intrinsic value. Appropriate measures of financial integrity include
debt/equity ratios, financial leverage, asset turnover, profit margin, return on equity, and
interest coverage. It is anticipated that purchases will be made when economic and issue-
specific conditions are less than ideal and sentiment is uncertain or negative. Conversely, it
is expected that gains will be realized when issue-specific factors are positive and
sentiment is buoyant. Assets of the Fund are administered and managed on a combined
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basis through specialist portfolios. Fund managers will be expected to generate a rate of
return in the first quartile or better over a market cycle.
b) Risk Philosophy
In order to achieve its long-term investment goals, the Plan must invest in assets that have
uncertain returns. However, UW attempts to reduce the overall level of risk by diversifying
the asset classes and further diversifying within each individual asset class.
2.03 Portfolio Return Expectations
The annualized rate of return of the Plan must exceed the annualized rate of increase in the CPI by
at least 360 basis points net of the associated investment management fees over rolling ten-year
period.
2.04 Expected Volatility
The volatility of the assets of the Plan is directly related to its asset mix. Since the fund managers
do not have authority to make any type of leveraged investment on behalf of the Plan, the volatility
of the assets of the Plan should be similar to the volatility of the Benchmark Portfolio set out in
section 4.02 (Performance Measurement).
2.05 Asset Mix
The following benchmark portfolio is used by the Consulting Actuary to calculate the return
assumptions for the Plan. At all times, the market value of the individual asset classes will be within
the minimum and maximum aggregate investment limits as listed.
Assets Minimum % Maximum % Benchmark
Portfolio %
Benchmark
Cash 0 5 2 FTSE TMX Canada 91-Day T-Bill
Fixed Income 20 45 33 FTSE TMX Universe Bond
Total Fixed
Income
20 45 35
Canadian Equity 5 15 15 S&P/TSX Composite
Global Equity 30 55 40 MSCI World (CAD)
Total Equity 45 70 55
Infrastructure 0 10 5 UBS 50/50 (CAD)
Real Estate 0 10 5 FTSE EPRA/NAREIT Developed
(CAD)
Total Alternatives 0 20 10
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For the purpose of the total asset mix described above, the fund managers’ asset class pooled
funds are deemed to be 100% invested, even though these funds may contain a portion held in
cash and cash equivalent instruments.
The asset mix may deviate from the above mix, within the limits prescribed in the Policy. The
monitoring of the asset mix and rebalancing guidelines are set out in Section 5.02 (Monitoring of
Asset Mix). In order to ensure that the assets operate within the minimum and maximum ranges,
UW shall review the asset mix on a quarterly basis. Rebalancing will be conducted as required.
The Plan’s target asset allocation for each investment category listed in subsection 76(12) of the
regulations to the Pension Benefits Act (Ontario) is as follows:
Asset Class under Sub-section 76(12) of the Pension Benefits Act (Ontario)
Long Term
Target
Allocation
Accessed
Through Pooled
Funds (Y/N)
1. Insured Contracts 0.0% -
2. Mutual or pooled funds or segregated funds 0.0% -
3. Demand deposits and cash on hand 2.0% -
4. Short-term notes and treasury bills 0.0% -
5. Term Deposits and guaranteed investment certificates 0.0% -
6. Mortgage Loans 0.0% -
7. Real Estate 5.0% N
8. Real Estate Debentures 0.0% -
9. Resource properties 0.0% -
10. Venture Capital 0.0% -
11. Corporations referred to in subsection 11(2) of Schedule III to the federal investment regs 0.0% -
12. Employer issued securities 0.0% -
13. Canadian stocks other than investments referred to in 1 to 12 above 15.0% N
14. Non-Canadian stocks other than investments referred to in 1 to 12 above 40.0%
a) Oldfield Y
b) Walter Scott Y
c) TD Emerald U.S. Pooled Y
d) TD Emerald International Equity Index Y
15. Canadian bonds and debentures other than investments referred to in 1 to 12 above 33.0%
a) TDAM Universe Index Y
b) TDAM Active Short Term Corporate N
16. Non-Canadian bonds and debentures other than investments referred to in 1 to 12 above 0.0% -
17. Investments other than investments referred to in 1 to 16 above 5.0%1
N1 Refers to the long term target allocation to Direct Infrastructure
2.06 Management Structure
A diversified management structure has been adopted for the Plan consisting of several managers.
This structure has been adopted as it is believed that the different investment mandates will result
in increased diversification, while reducing the ‘manager risk’ effect for the Plan.
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Section 3 — Permitted and Prohibited Investments
3.01 General Guidelines
The investments of the Plan must comply with the requirements and restrictions imposed by the
applicable legislation, including but not limited to the requirements of the ITA, the PBA and their
respective Regulations, any other applicable federal or provincial legislation and regulations
governing the investment of pension funds, including Schedule III to the PBSA and this Policy.
3.02 Permitted Investments
In general, and subject to the restrictions in this section (Section 3), the investment manager may
invest in any of the following asset classes and in any of the investment instruments listed.
a) Cash and Short Term Investments
Cash on hand, demand deposits, treasury bills, short-term notes and bankers’
acceptances, commercial paper, term deposits and guaranteed investment certificates
having a term of less than or equal to one year.
b) Fixed Income
Bonds, debentures, or other debt instruments of corporations, Canadian Governments,
Government agencies, or guaranteed by Governments, supranationals, federal real return
bonds, mortgage-backed securities, mortgages, asset-backed securities, non-convertible
preferred shares, term deposits, guaranteed investment certificates, insurance contracts,
private placements and bonds where capital, interest or both are linked to increases in the
cost-of-living (i.e. real return bonds).
c) Equities
Common shares, preferred shares, American Depository Receipts, Foreign Depository
Receipts, rights, warrants, installment receipts, index units, income trust units (including
real estate investment trusts) and securities convertible into common shares.
d) Derivatives
The pooled funds in which the Plan invests may invest directly in derivatives to create
synthetic exposures, or for hedging purposes, if their objectives and strategies permit, and
if the exposure to derivatives is subject to limits based on the intended use and strategies
for derivatives and the risks associated with them. Derivatives may also be used to hedge
currency. Derivatives may not be used for speculative trading or to create a portfolio with
leverage. Investment funds that invest in derivatives must comply with all applicable
statutory provisions and regulations, including the Prudent Person Rule and must be
invested and managed in accordance with regulatory derivatives best practices.
e) Pooled Funds
Investments in open-ended or closed-ended pooled funds provided that the assets of such
funds are permissible investments under this Policy. While the guidelines in this Policy are
intended to guide the management of the assets, it is recognized that, where pooled funds
are held, there may be instances where there is a conflict between this policy and the
investment policy of a pooled fund. In that case, the pooled fund policy shall dominate,
subject to the compliance reporting procedures outlined in Section 4.03. However, the
investment manager is expected to advise UW in the event of any material discrepancies
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between the above guidelines and the pooled fund’s own investment guidelines. In addition,
the investment manager will ensure that UW has received a copy of the most recent
version of the pooled fund policy and of any amendments made to the pooled fund policy.
3.03 Minimum Quality Requirements
a) Quality Standards
Within the investment restrictions for individual portfolios, all portfolios should hold a
prudently diversified exposure to the intended market.
i. The minimum quality standard for individual bonds and debentures is ‘BBB’ or
equivalent as rated by at least two Recognized Bond Rating Agencies, at the time of
purchase. Where an investment in the portfolio is downgraded below a ‘BBB’ rating, the
following steps will be taken:
˗ The investment manager will notify UW of the downgrade by telephone at
the earliest possible opportunity;
˗ Within ten business days of the downgrade, the investment manager will
advise UW in writing of the course of action taken or to be taken by the
investment manager, and its rationale; and
˗ Immediately upon downgrade, the investment manager will place the asset
on a Watch List subject to monthly review by the investment manager with
UW until such time as the security matures, is sold or until it is upgraded to
a level consistent with the purchase quality standards as expressed in the
guidelines mentioned above.
ii. In cases in which the Recognized Bond Agencies do not agree on the credit rating, the
bond will be classified according to the methodology used by FTSE TMX, which states:
˗ If two agencies rate a security, use the lower of the two ratings;
˗ If three agencies rate a security, use the most common; or
˗ If all three disagree, use the middle rating.
b) Rating Agencies
For the purposes of this Policy, the following rating agencies shall be considered to be
‘Recognized Bond Rating Agencies:’
i. Dominion Bond Rating Agency;
ii. Standard and Poor’s; and
iii. Moody’s Investors Services.
3.04 Maximum Quantity Restrictions
a) Total Plan Level
UW shall not, directly or indirectly, lend or invest moneys of the Plan to or in any one
person, any associated persons or any affiliated corporations if:
˗ 10% or more of the total market value of the Plan’s assets has already been lent or
invested, in total, to or in the person, the associated persons or the affiliated
corporations; or
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˗ 10% or more of the total market value of the Plan’s assets would be lent or
invested, in total to or in the person, the associated persons or the affiliated
corporations as a result of the loan or investment.
˗ Holdings issued by the Government of Canada and its agencies are exempt from
the abovementioned 10% limitations.
UW shall not, directly or indirectly, invest the moneys of the Plan in the securities of a
corporation to which are attached more than 30% of the votes that may be cast to elect the
directors of the corporation.
This section applies to those investments and loans subject to quantitative limit under
Section 9(1) of Schedule III to Pension Benefits Standards Regulations, 1985 (Canada).
b) Fixed Income
i. Maximum 15% of the market value of the Canadian fixed income securities shall be
invested in BBB bonds or debentures
ii. Maximum 10% of the actively managed fixed income portfolio may be invested in debt
denominated in US currency, including debt issued by the US Government, its
agencies and instrumentalities. No other foreign currency debt will be purchased.
c) Equities
No one equity holding shall represent more than 10% of the total market value of the
manager’s portfolio.
3.05 Environmental, Social and Governance Factors
Consistent with its obligation to act in the best interest of the Plan, UW chooses investments and
investment managers that it believes will deliver superior financial performance over the long term.
In this regard, UW considers environmental, social and governance (“ESG”) factors in selecting
investment managers with whom it invests the assets of the Plan as well as assets that are directly
held. UW recognizes; however, that managers may consider ESG factors in different ways in
assessing whether a given investment will have the best economic outcome. In order to protect and
enhance the value of the Plan’s investments, when selecting investment managers or direct
investments, UW considers criteria that include: the manager’s business and staff; historical
performance; and the consideration of ESG factors in the investment process. As well, the proactive
disclosure and analysis of ESG factors by the investment manager will be considered in the
monitoring of, and ongoing decisions pertaining to, the retention of investment managers. For the
purposes of this section, ESG factors refer to the environmental, social and governance factors
relevant to an investment that may have a financial impact on that investment. It is accepted that
the understanding of and the impact from ESG factors may change over time.
3.06 Prior Notice Required
The fund managers shall not make investments in asset categories other than those explicitly
permitted in the Policy, unless UW first consents in writing. Each fund manager’s portfolio shall also
comply with all requirements and constraints in any supplementary document provided by UW.
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3.07 Securities and Cash Lending
The fund managers and custodian may participate in securities lending programs for the purpose of
generating revenue, subject to the provisions of the PBA, the ITA and their applicable Regulations.
Such loans must be secured by cash and/or readily marketable government bonds, treasury bills
and/or letters of credit, discount notes, banker’s acceptances of Canadian chartered banks or high
quality, liquid equities. The amount of collateral taken for securities lending should reflect OSFI
standards and best practices in local markets. This market value relationship must be calculated at
least daily.
Fund managers and custodians participating in securities lending will make available the terms and
conditions of any securities lending program(s) with UW.
3.08 Short Selling
Short selling and/or pair trading are not permitted.
3.09 Liquidity
Investments should be liquid enough so that they can be sold in a reasonable period of time. The
investments should be valued at least monthly and selected to ensure sufficient liquidity to meet
transaction needs.
3.10 Borrowing
The Plan shall not borrow money, except to cover short-term contingency and the borrowing is for a
period that does not exceed ninety days, subject to the PBA, the ITA and the written permission of
UW.
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Section 4 — Monitoring and Control
4.01 Delegation of Responsibility
The Board of Governors of the University of Waterloo (the “Board”) has established a Pension
Investment Committee (“PIC”) to assist in the determination of UW’s overall investment philosophy,
policies, objectives and strategies for the Plan, and a P&B Committee to assist in the management
of the pension fund. UW assists in carrying out the responsibilities listed below.
a) PIC will:
i. review this document annually and recommend any changes to P&B;
ii. review pension fund performance on at least a semi-annual basis;
iii. review Fund Manager performance on at least a semi-annual basis;
iv. make recommendations on the selection of Fund Managers to P&B;
v. approve asset mix changes and investment decisions where the cumulative annual
transaction(s) represent less than 15% of the Plan’s total assets at the beginning of
the calendar year;
vi. convene a meeting with the P&B Committee in the event of a significant market
event or shift to discuss issues and market opportunities; and
vii. provide quarterly reports to P&B Committee and the Finance & Investment
Committee
b) Working with the PIC with respect to investment philosophy, policies, objectives and
strategies, the P&B Committee will make recommendations to the Board in the following
areas:
i. the content of this document after its annual review and consultation with PIC;
ii. the selection of a Consulting Actuary;
iii. the selection of Fund Managers based on the recommendation from PIC;
iv. asset mix changes and investment decisions where the cumulative annual
transaction(s) exceed 15% of the Plan’s total assets at the beginning of the
calendar year based on the recommendation from PIC; and the selection of a
Custodian/Trustee to hold the pension fund assets.
c) In addition, the P&B Committee will:
i. consider reports from PIC on pension fund performance on at least a semi-annual
basis;
ii. consider reports from PIC on Fund Manager performance on at least a semi-annual
basis;
iii. provide cash flow information to the PIC, if necessary;
iv. be responsible for the delegation of any responsibilities not specifically mentioned;
and
v. report to Plan members on at least an annual basis;
d) The Fund Managers will:
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i. forward to PIC quarterly reviews of investment performance, expectations of future
returns on various asset classes and proposed investment strategies for the
following 12 to 24 months;
ii. manage asset mix and select securities within each asset class, subject to
applicable legislation and the philosophy and other constraints set out in this
document;
iii. forward to PIC quarterly reports describing their ESG analysis and approach;
iv. advise PIC immediately of any changes in its senior investment personnel and/or
significant changes in the size or mix of assets managed;
v. comply with all relevant laws concerning the investment of the pension fund; and
vi. complete and deliver a compliance report (see page 10) to PIC and the Fund’s
Consulting Actuary each quarter. The compliance report will indicate whether or not
the Fund Manager was in compliance with this Statement during the quarter. In the
event that the Fund Manager is not in compliance with this Statement, the Fund
Manager is required to advise PIC immediately, detail the nature of the non-
compliance and recommend the appropriate course of action to remedy the
situation.
vii. comply, at all times and in all respects, with the Code of Ethics and Standards of
Professional Conduct as promulgated by the CFA Institute.
viii. manage the assets with the care, diligence and skill that an investment manager of
ordinary prudence would use in dealing with pension plan assets.
ix. use all relevant knowledge and skill that they possess or ought to possess as a
prudent investment manager.
e) The Consulting Actuary (or his/her delegate approved by P&B Committee and PIC) will:
i. assist in the preparation and subsequent annual reviews of this document;
ii. participate in all reviews of the Fund Managers and the Plan;
iii. report, at least semi-annually, on the performance of the Fund Managers and the
Plan;
iv. comment on any changes in the Plan’s benefits, membership or contribution flow
which may affect how the Plan’s assets are invested;
v. comment on the impact of potential investment opportunities/strategies/legislative
changes which may affect how the Plan’s assets are invested;
vi. assist in the implementation of this document;
vii. monitor the performance of the Plan and the Fund Managers on a regular basis,
and contact PIC immediately if there are adverse changes of any kind, which
warrant further review and/or investigation;
viii. support PIC and the P&B Committee on matters related to investment management
and administration of the Plan; and
ix. meet with UW and the PIC or P&B Committee as required.
f) The Custodian/Trustee will:
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i. fulfill the regular duties required by law of a Custodian/Trustee and perform the
specific duties required of the Custodian/Trustee pursuant to agreements entered
into from time to time with UW; and
ii. provide UW with monthly portfolio printouts of all assets of the Plan and
transactions during the period.
4.02 Performance Measurement
For purposes of evaluating the performance of the Plan and the fund managers, all rates of returns
are measured over rolling four-year periods. Return objectives are net of fees and include realized
and unrealized capital gains or losses plus income from all sources.
(a) Total Fund
Investment weightings and results for the Plan are to be tested regularly against a long-term
Benchmark Portfolio comprising:
Benchmark %
FTSE TMX Canada 91-Day T-Bill 2.0
FTSE TMX Universe Bond 33.0
S&P/TSX Composite 15.0
MSCI World (CAD) 40.0
UBS 50/50 (CAD) 5.0
FTSE EPRA/NAREIT Developed (CAD) 5.0
(b) Investment Manager Mandates
Fund managers are subject to the following objectives on a gross of fees basis and over rolling
four-year periods:
Investment Manager and Mandate Objective
TDAM Universe Bond Index Tracking error within +/- 6 basis points of index return
TDAM Short Term Corporate Bond Index + 50 basis points
TDAM Emerald US Equity Index Tracking error within +/- 8 basis points of index return
TDAM Emerald International Equity Index Tracking error within +/- 20 basis points of index return
Sionna Canadian Equity Index + 100 basis points
Oldfield Global Equity Index + 200 basis points
Walter Scott Global Equity Index + 200 basis points
(c) Qualitative Monitoring
In addition to performance criteria, the following qualitative factors will also be monitored and
evaluated:
i. Stability of the investment firm (personnel, assets under administration, operational
capabilities, etc.);
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ii. Investment objective and portfolio composition;
iii. Changes in the investment philosophy used in the investment fund;
iv. Consistency of style or approach;
v. Adherence to investment policy statement; and
vi. ESG analysis and reporting.
4.03 Compliance Reporting by Investment Manager
The investment manager is required to complete and deliver a compliance report to UW and the
Plan’s investment consultant each quarter. The compliance report will indicate whether or not the
investment manager was in compliance with this Policy, including its ESG requirements, during the
quarter.
In the event that an investment manager is not in compliance with this Policy, the investment
manager is required to advise PIC immediately, detail the nature of the non-compliance and
recommend an appropriate course of action to remedy the situation.
The Plan invests in pooled funds with separate investment policies. Should a conflict arise between
those investment policies and this Policy, the investment manager’s pooled fund policy shall
dominate. However, the investment manager is required to advise PIC immediately, detail the
nature of the conflict and recommend an appropriate course of action to remedy the situation.
4.04 Audit
At such time as an audit is required by the regulatory authorities, the Plan shall be audited annually
as at the fiscal year of the Plan, by external auditors appointed by UW.
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Section 5 — Administration
5.01 Conflicts of Interest
a) Responsibilities
This standard, which is consistent with UW Policy 69 (Conflict of Interest) applies to UW
and the members of UW, as well as to all agents employed by them, in the execution of
their responsibilities under the PBA (the “Affected Persons”).
An “agent” is defined to mean a company, organization, association or individual, as well as
its employees who are retained by UW to provide specific services with respect to the
investment, administration and management of the assets of the Plan.
b) Disclosure
In the execution of their duties, the Affected Persons shall disclose any material conflict of
interest relating to them, or any material ownership of securities, which could impair their
ability to render unbiased advice, or to make unbiased decisions, affecting the
administration of the Plan assets.
Further, it is expected that no Affected Person shall make any personal financial gain (direct
or indirect) because of his or her fiduciary position. However, normal and reasonable fees
and expenses incurred in the discharge of their responsibilities are permitted if documented
and approved by UW
No Affected Person shall accept a gift or gratuity or other personal favour, other than one of
nominal value, from a person with whom they deal with in the course of performance of his
or her duties and responsibilities for the Plan.
It is incumbent on any Affected Person who believes that he or she may have a conflict of
interest, or who is aware of any conflict of interest, to disclose full details of the situation to
the attention of UW immediately. UW, in turn, will decide what action is appropriate under
the circumstances but, at a minimum, will table the matter at the next regular meeting of the
appropriate committee.
No Affected Person who has or is required to make a disclosure as contemplated in this
Policy shall participate in any discussion, decision or vote relating to any proposed
investment or transaction in respect of which he or she has made or is required to make
disclosure.
5.02 Monitoring of Asset Mix
In order to ensure that the assets of the Plan operate within the minimum and maximum ranges, as
prescribed in the Policy in Section 2.05 (Asset Mix), PIC shall review the asset mix at least
quarterly. Rebalancing will be conducted as required.
5.03 Selecting Fund Managers
In the event that a new investment manager must be selected or additional investment manager(s)
added, PIC will undertake an investment manager search. The criteria used for selecting an
Investment Manager will be consistent with the investment and risk philosophy set out in Sections
2.02 (Investment and Risk Philosophy) and 3.05 (Environmental, Social and Governance Factors).
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5.04 Monitoring Manager Performance
At least quarterly, the PIC and UW will monitor and review:
a) Each investment manager’s staff turnover, consistency of style and record of service;
b) Each investment manager’s current economic outlook and investment strategies (including
ESG approach);
c) Each investment manager’s compliance with this Policy; and
d) Investment performance of the assets of the Plan in relation to the rate of return
expectations outlined in this Policy.
5.05 Dismissal of an Investment Manager
Reasons for considering the termination of the services of an investment manager include, but are
not limited to, the following factors:
a) Performance results which are below the stated performance benchmarks;
b) Changes in the overall structure of the Plan’s assets such that the investment manager’s
services are no longer required;
c) Change in personnel, firm structure or investment philosophy which might adversely affect
the potential return and/or risk level of the portfolio; and/or
d) Failure to adhere to this Policy.
The failure to achieve the goals stated in Section 4.02 (Performance Measurement) over a period of
four consecutive years will require a reassessment of such goals and/or the appointment of an
alternative investment manager.
5.06 Voting Rights
The voting rights acquired through the investments held by the Plan are delegated to the fund
managers of the securities. Fund managers are expected to exercise all voting rights related to
investments held by the Plan in the interests of the Plan’s members.
5.07 Valuation of Investments Not Regularly Traded
The following principles will apply for the valuation of investments that are not traded regularly:
a) Equities
Average of bid-and-ask prices from two major investment dealers, at least once every
month.
b) Fixed Income
Same as for equities.
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Section 6 — General Provisions
6.01 Related Party Transactions
UW, on behalf of the Plan, may not enter into a transaction with a related party unless:
a) The transaction is made for the operation or administration of the Plan under terms and
conditions that are not less favourable to the Plan than market terms and conditions and
such transaction does not involve the making of loans to, or investments in, the related
party; or
b) The combined value of all transactions with the same related party is nominal or the
transaction(s) is immaterial to the Plan.
For the purposes of this section, only the market value of the combined assets of the Plan shall be
used as the criteria to determine whether a transaction is nominal or immaterial to the Plan.
Transactions less than 0.5% of the combined market value of the assets of the Plan are considered
nominal.
In addition, the prohibition to entering into transactions with a related party does not apply to
investments:
a) In an investment fund in which investors other than the Administrator and its affiliates may
invest and that complies with the requirements set out in Sections 9 and 11 of Schedule III
to the PBSA;
b) In an unallocated general fund of a person authorized to carry on a life insurance business
in Canada;
c) In securities issued or fully guaranteed by the Government of Canada, the government of a
province, or an agency of either one of them;
d) In a fund composed of mortgage-backed securities that are fully guaranteed by the
Government of Canada, the government of a province, or an agency of either one of them;
e) In a fund that replicates the composition of a widely recognized index of a broad class of
securities traded at a marketplace (as that term is defined in the PBSA); and
f) That involve the purchase of a contract or agreement in respect of which the return is based
on performance of a widely recognized index of a broad class of securities traded at a
marketplace (as that term is defined in the PBSA).
A “related party” in respect of the Plan means:
a) A person who is the administrator of the Plan including any officer, director or employee of
the administrator. It also includes the Managers and their employees, a union representing
employees of the employer, a member of the Plan, a spouse or child of the persons named
previously, or a corporation that is directly or indirectly controlled by the persons named
previously, among others. Related party does not include government or a government
agency, or a bank, trust company or other financial institution that holds the assets of the
Plan, where that person is not the administrator of the Plan;
b) An officer, director or employee of one of the administrators of the Plan;
c) A person responsible for holding or investing the assets of the Plan, or any officer, director
or employee thereof;
d) An association or union representing employees of UW, or an officer or employee thereof;
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e) A member of the Plan;
f) The spouse or child of any person referred to in any of paragraphs (a) to (e);
g) An affiliate of UW;
h) A corporation that is directly or indirectly controlled by a person referred to in any of
paragraphs (a) to (g); and/or
i) An entity in which a person referred to in paragraph (a) or (b), or the spouse or a child of
such a person, has a substantial investment.
6.02 Policy Review
The P&B Committee shall review and either confirm or amend this Policy at least annually. The
P&B Committee will also provide any amended copy of this Policy to the investment manager and
the Plan’s actuary.
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Appendix A — Investment Manager Compliance Letter
To be completed by fund managers each quarter.
UNIVERSITY OF WATERLOO
_______________, 202_
This is to certify that I/we have adhered to the guidelines contained in the November 2020 version of the
“Statement of Investment Policies and Procedures” for the University of Waterloo Pension Plan (2011),
approved by the Board of Governors of the University of Waterloo.
Signed _________________________
On behalf of _____________________
Date ___________________________